Market Commentary | November 2016

Update from Nathan Woods, head of The Trust Company’s Investment Committee, about the Markets’ recent activities and how we’re keeping your best investment interests in mind.

Key takeaways

How are the following effecting the market and your investments?

The Presidential Election’s effect on the Stock Market

Potential Interest Rate increases

An overall look at this year’s market performance

Transcript:

Hello. Nathan Woods head of the investment committee at The Trust Company here and I would like to touch base on a few key points. First, touching base on the U.S. presidential election and what it may entail for the stock market. Next, the federal reserve and their potential rate increase in December later this year, and Lastly just an update on the overall stock market what we have seen so far this year and what me might expect going forward.

The first point, though, and the one that is weighing on most minds is the presidential election. I think our chairman and CEO at The Trust Company says it best in that, “If you drink Coca-Cola today unless something drastic happens you are still going to drink Coca-Cola after the election. So all-in-all the worlds not going to end no matter who is elected. Businesses will continue and we will continue going with our lives.”

A few key matrix based on a study based on performed by Hartford Funds in September 43% of respondents think a Republican president will be better for investments, but also a third of those people don’t really think party affiliation matters. In fact, over the last 14 election-years only two of those years have been negative and that was in 2000 and in 2008 when we saw the dot com bubble as well as the Great Recession. So those were differing factors there. We do expect that the market will stay positive this year. Since 1961 the S&P 500 has performed better on average under democratic presidents, but who knows? There is no set rhyme or reason. In today’s day and age something as small as the iPhone can affect the global economy in ways greater than who is in the White House. The iPhone creates and supports almost 2 million jobs world-wide and nearly all small businesses use and utilize smart phone technology. Ultimately, as we all know, asset class performance varies year after year no matter if there is an election or not, and long-term investment horizons are key. Ultimately as well, the party affiliation of Congress – House and Senate – that more greatly affects performance of the stock-market long-term than that of the presidential party.

Next, in December the Federal Reserve (also known as the Fed) will meet to reassess a potential rate increase. Earlier in September they voted not increase interest rates. While an increase in rates can help maintain a stable inflation rate in monetary supply, the stock-market doesn’t always view this as a good thing. Now in September the broad stock-market did rise after the Fed chose to keep rates where they were, but the chances of a rate increase in December are quite high. We think they will go up. But that may be impacted as to how the stock-market reacts with the new president elected in November. Eventually rates will increase. The difficult answer is knowing when they will increase and how often that increase will happen.

Finally, performance this year 2016 has been positive overall, but no key asset has won the race so to speak. Performance of the ACWI – an index that measures countries all over the world so the U.S. and international countries – is up nearly 5% for the year through October so great performance there. Remember the same type of investment whether it be large stocks or international stocks , U.S. bonds or really anything no one asset performs the best year after year. A diversified portfolio allocation with not too many stock and not too many bonds can provide the most consistent returns over that long-term investment horizon. Now adding diversification might not make portfolios the highest performers every year, but more importantly it will help shelter investments from being the lowest performers on those years. All –in-all a good blend of U.S. and international stocks and a good blend of U.S. and international bonds and money markets – if you need that cash in the near future – that good blend is the best way to ensure your investment needs are met. Whether you are in retirement or whether you have just begun your career whether you plan to leave a legacy when you pass away or whether you are still building that legacy for yourself and your spouse and generations to come.

No one knows what to expect from the markets for sure, but be sure to manage your expectations on the downsides as well as the upsides. We would love to help you with your investments needs. Love to answer any questions you have. Reach out to anyone at The Trust Company any time if we can help. Until we chat again have a great fall and a great remainder of 2016.